Monday, May 30, 2005

I must say that I found Star Wars III quite boring. Just endless battles and duels punctuated with Lucas's trademark dialogue. Even the visuals become too little by trying to be too much. But it would have been incredibly rude to say this to certain close blood relatives who live for the saga.As for the ostensible Bush references, a reviewer somewhere noted that this isn't quite the right movie to criticize people for seeing things in black and white. But it would be a kick if we learned (a la Palpatine) that Bush actually is also Osama Bin Laden.

Thursday, May 26, 2005

Musical note for the likeminded: Brian Eno is releasing, on June 14, his first rock album in 25 years or so. Since I am about to head to JFK (conference in Palo Alto), I suppose his Music for Airports is what I really need, but I am bringing my own supply (have IPod & Walkman, will travel).A strong recommendation for Belle and Sebastian's just-released Push Barman to Open Old Wounds, a collection of their last few years' singles and EP tracks, perhaps superior to any of their albums since Tigermilk. I already have all the tracks, but if you don't, then try Tigermilk followed by either If You're Feeling Sinister or this.Also released this week were new albums by Stephen Malkmus and Sleater-Kinney, making this a pretty good week although unfortunately, in my case, not soon enough for my West Coast flight. Oh well, but at least I am still catching up on some old Captain Beefheart albums.

"Orwellian" is one of the most overused words around - but - what else can you really say when the Bush Administration denounces Newsweek for a single-sourced story that we now know was essentially true (i.e., the incidents happened even if the military was not on the verge of confirming this officially), and blaming Newsweek for disturbances that its own on-site military officials said were totally unrelated?When you think of all the lies and deceptions that the Administration fostered in its rush to Iraq, and the horrendous harm it has done to our country's standing in the Muslim world and elsewhere through all the torture and murder perpetrated through its deliberate policies, this one is so far beyond belief that ... I don't even know how to finish the sentence. Utterly, utterly astonishing. When people in the future look back at this, they will be dumbfounded.The type of mindset one needs to perpetrate and accept this type of blatant hypocrisy doesn't seem compatible with respect for democratic institutions, which is one reason I worry that the forces behind the Bush Administration are unique in U.S. history.UPDATE: Looking further through the on-line Times I see that Amnesty International has "listed the abuse of detainees at Abu Ghraib prison in Iraq, the detention of prisoners at Guantánamo Bay, Cuba, and the so-called rendition of prisoners to countries known to practice torture as evidence that the United States 'thumbs its nose at the rule of law and human rights.'"It would be nice to be able to disagree with this. And from the self-centered perspective of an American, it would be nice if our country's leadership at least did not apply this worldview to domestic affairs.A bit more from Amnesty International:"'It's not because the United States is the worst human rights abuser in the world but because it's the most influential,' said Kenneth Roth, the executive director of Human Rights Watch, via phone from New York. 'United States disregard for international human rights standards is damaging those standards,' he said, referring to some governments with poor human rights records 'citing the U.S. record to justify their own.'In a separate telephone interview, Dr. Schulz of Amnesty International USA acknowledged his organization had used 'strong language' because it felt that 'the United States has betrayed a very fundamental principle that this country stands for.'"So this is not left wing, Jean Paul Sartre-style hypocrisy and double standards. It is a reflection of how far this country has fallen since January 20, 2001.

Monday, May 23, 2005

Grover Norquist professes puzzlement that his name is plastered all over the infamous Jack Abramoff's billing records. Despite the fact that they work closely together on lobbying and politics alike (to them there is no distinction) and have been close friends and associates since college, Grover insists: "He took the path I didn't take, which was to go make money as a consultant, and I decided to build A.T.R." Don't be so hard on yourself, Grovesterino - may I call you that? - I'm sure you've done fine, too.If Grover does end up being driven undercover or even doing time, he does at least have a career in comedy to look forward to. Check out this hilarious passage from the above link:"Earlier this month, Americans for Tax Reform sent letters to the Coushatta tribe of Louisiana and the Saginaw Chippewas of Michigan, saying there 'may be some confusion' about the reason some were invited into White House meetings in earlier years. 'Recent press reports appeared to suggest that some staff of your tribe's previous leadership thought that they were making a contribution to A.T.R. in order to be invited to a White House event,' the letter said."I wonder how they could have gotten that silly idea?

Sunday, May 22, 2005

William Bundy's "A Tangled Web: The Making of Foreign Policy in the Nixon Presidency" has a final sentence that I find very melancholy now, although it wasn't when Bundy published the book in 1998:"If there is any single lesson from the Nixon era that stands out above all others, it is that a pattern of deception, of Congress and the American people, is in the end doomed to failure."Even if bellbottom jeans were tacky, those certainly were the days.

This review is not as funny as the one I linked previously here. But it does show, if you read to the next to last paragraph, that the man has written a huge doorstop on international economics, blurbed by the likes of Nobel economist Joseph Stiglitz, without understanding comparative advantage, which is the single most important idea in international economics and has been known for nearly two centuries.

Saturday, May 21, 2005

Dave's memorial was a lovely event, albeit on a horribly cold and wet day, in which it was amazing (even for such an occasion) how completely positive everyone's feeling about him were. Apparently, he was easygoing even as an adolescent (!). Also interesting how he had several different parts of his life that people in one part didn't always know about because he was reticent about personal stuff.Anyway, here is a copy of my remarks at the ceremony: The first time I ever talked at any length with David will always be a bright spot in my memory. I was in New York City, because I was considering relocating from Chicago to NYU, and NYU’s law dean, John Sexton, had hooked me up with David so that we could discuss the possibility of running a tax policy colloquium together. I remember this trim, vigorous man with a shock of white hair and an amazingly warm smile plus enthusiasm to match. We took a long walk around the Central Village and Soho, and talked about what we could do. It was the beginning of a 10-year run that ought to have continued for another 10 years at least. David was great to go to battle with, although by “battle” I just mean trying to have a good and enlightening session that everyone, including us, would learn from and enjoy. And it’s amazing to me, in retrospect, how much his enjoyment contributed to mine and that of everyone else in the room. He enjoyed the dialogue, the jokes when they came, and the attempt to understand things better. And he definitely enjoyed the food. I generally picked the restaurants where we continued the conversations with a small group, and I only realized after the terrible thing had happened how much of my own enjoyment was bound up in finding new places that I hoped David would like. I have never known anyone as willing and interested as him when it came to discussing and pursuing disagreements in an amiable and open-minded spirit. A mutual friend from another university tells the story of how, while still quite junior, he first got to know David, who at the time was running the Public Economics program at the National Bureau of Economic Research. The colleague who tells this story had written a paper that David was strongly inclined, as an initial matter, to disagree with. For quite a few eminent people whom I have met in academics, the next step, had they been in David’s position, would have been obvious. They would have thought: this guy’s an idiot; he’s junior and I’m not; I don’t like him; he’s certainly not presenting that paper at my forum. David’s reaction was different. He found it interesting and noteworthy that someone else, by the appearance of things intelligent and thoughtful, viewed the issue so differently than he did. So he called this much more junior person on the phone and said: let’s get together and discuss it. I gather they hit it off personally, which was not hard to do with David, and, after a number of lengthy discussions, David decided that he agreed with the view the paper took. Not to make him too much of a teddy bear - David was tough on sloppy thinking, and willing to argue as vigorously as he was willing to be argued with. But his enjoyment of it all, and the total absence of anything resembling anger or vanity or pretense, meant that nearly everyone took it well. I think of David whenever I pass the coffeehouses in the West Village where we used to meet on Wednesday nights to plan the next day’s session. And of course all the restaurants. There are too many of those places. I miss him when I want to compare notes about an idea, or current events, or someone we both know. It was consistently delightful to spend time with him, and of course I learned a great deal, as I think just about everyone who spent time with him did. We had all these jokes together, as well as a set of ongoing serious dialogues, whether about topics of professional interest, or the war in Iraq, or Daniel Dennett, or behavioral economics, or the instances where I took a skeptical view of someone’s behavior and he was just too nice to see it that way. He really couldn’t imagine, for example, that other people would ever be rude or nasty or disingenuous, because he so completely lacked any such inclinations himself. Although obviously life is very unfair sometimes, or we wouldn’t be here today for this occasion, in terms of personal reputation you reap what you sow. Gundel has told me how amazing she and other family members found the outpouring of love and warmth and concern that came in from people around the world who knew David professionally, or even just had met him a couple of times. I myself heard from a lot of people who didn’t want to presume on the family’s time, but who felt the same way about him as do all of us here today. For myself, the long view to take is simply that I am fortunate to have known David for as long as I did. And a feeling of celebration and joy, not sorrow however strong the grounds for it, is what I know he would have wanted people to express and to feel today. So thanks, David, and much though I will miss you I will be thinking of you in the years ahead as if you were still here.

Friday, May 20, 2005

Sometimes I wonder if it makes sense to quote other blogs that are well-known enough (especially compared to mine) that most interested readers might have seen them already. But I couldn't pass up this nugget from Brad DeLong, concerning the Bush Administration's Social Security activities:"It is a clown show, an episode of stupidity of a jaw-dropping magnitude: "1. The administration's Social Security gurus shove Bush out there with talking points saying that we need to act now to pass the Bush plan, because starting in 2017 Social Security will start taking resources away from the rest of the government and that's a very bad thing--and then they roll out a plan in which Social Security starts taking resources away from the rest of the government in 2011."2. The administration's Social Security gurus shove Bush out there with talking points saying that passing the Bush plan is essential because if we don't the Social Security trust fund balance will hit zero in 2041, and big benefit cuts will then be necessary--and then they roll out a plan in which the Social Security trust fund balance hits zero in 2030."3. The administration's Social Security gurus shove Bush out there with talking points about the importance of restoring actuarial balance to Social Security--and then they roll out a plan which closes less than a third of the 75-year funding gap (and refuse to specify the plan in sufficient detail to allow anyone to do a longer-run analysis)."This is what people mean when they say, a la the Paul O'Neill book, that this is the first Administration in modern U.S. history that does not have a policymaking process.

Thursday, May 19, 2005

These were my comments today on David at an NTA Tax Reform panel that was dedicated to him. Regular readers will note some thematic overlap with my Wall Street Journal piece.

In tax reform circles, David Bradford is best known as a leading, or really the leading, consumption tax advocate. But he was an unusual sort of advocate. In law, we think of an advocate as someone who’s paid to take a position. Thus, if you’re arguing in front of the Supreme Court, it somehow turns out that all issues and precedents favor your client. Academics who take an advocacy stance in public policy ought to be different than this, but all too often they are not. We could all tell stories about people torturing the data until it confesses, or trimming their sails to retain political influence, or endorsing debased versions of their pet proposals in the hope of making a sale. David could not have been more different. He was an advocate only in the best sense of having a considered view. David first encountered tax reform when he went to the Treasury in the 1970s and developed what became Blueprints. During that time, he acquired what became a lifelong preference for consumption taxation. This preference stood on two main grounds. The first and main one was that he didn’t think it made sense to base a portion of distribution policy, as does an income tax, on whether one has a taste for sooner or later consumption. Second, as an economist who was willing to talk to tax lawyers – a trait I always found endearing – he came to see just how much complexity and tax planning come out of trying to tax the second half of the Haig-Simons income formula, change in net worth. While a consumption tax advocate, David was one of such almost excessive intellectual scrupulousness that he absolutely refused to make quite reasonable arguments in its favor that weren’t at the core of his considered view, such as that a consumption tax might be more efficient or might increase national saving. He also objected strongly to claims that the transition to a consumption tax could result in a lump sum wealth tax that people would neither see coming nor expect to recur. He did a great deal to advance our understanding of income to consumption tax transition, which he showed amounted to wiping out income tax basis. But I think he started from the instinct that the claim of a free lunch from an efficiency standpoint was simply too convenient to be true. David came to worry so much about transition when the rates change from year to year in a cash flow style tax that he spent much of his last few years trying to fix the problem. He actually made the X-tax a lot more complicated-looking so that rate changes wouldn’t cause big distortions or anomalies at the boundary between tax years. Needless to say, this was not a problem that he needed to address in terms of the politics of promoting the X-tax. If anything, he was making his system a harder sell by muddying the optics, but he did it because he actually cared above all about intellectual scrupulousness and about a system that would work as well as possible in practice. He would have said: leave it to the politicians to make omissions or compromises that worsened the system but made it enactable. That wasn’t his job. The funny thing during this period was how David kept moving towards income tax-style accounting, reflecting that a Haig-Simons income tax, or even one using accounting rules to get there approximately, doesn’t face significant transition issues from rate changes. I used to kid David that, once he finally persuaded everyone else in the world to favor a consumption tax, he would turn into the world’s last remaining income tax advocate. It’s hard to predict the future, & I’m personally not sanguine that a progressive consumption tax, which he over time persuaded me to favor, is actually where we are headed. But if we do ever get there, David will deserve a lot of credit for laying the intellectual groundwork, both in terms of how to think about the systems and in terms of institutional design. If you compare David to Henry Simons, who did so much to make comprehensive income taxation a dominant intellectual norm, the comparison is very much in David’s favor. Simons’ main argument for income taxation was formalistic. He argued: we have an income tax, and this is what income really is. Thus, in his book Personal Income Taxation, he disputed Irving Fisher’s advocacy of a consumption style base mainly on the ground that it wasn’t really “income.” David believed in a much more fundamental style of policy analysis. Indeed, one of David’s greatest strengths was his insistence on breaking everything down to fundamentals. For example, whenever he heard anything about taxing capital, he would say: What’s that? There is risk. There is waiting. There are returns to labor or to having a good opportunity or a good idea. But “capital,” in the way it is often used, doesn’t mean anything, or else it means too many things. Everyone who is interested in tax reform could learn a lot from David Bradford. If they decide to agree with him about the X-tax or the Blueprints cash flow tax, great. But I personally would settle for general acceptance not just of his level of intellectual scrupulousness but also of his insistence on careful and precise analysis.

Wednesday, May 18, 2005

Why, in this blog, am I taking such an interest in the nuclear option, which isn't exactly a tax, budgetary, or entitlements topic?Well, if I plug the Go-Betweens and Fiery Furnaces here, then why not the nuclear option. But there is another reason, bringing it closer to home professionally.I'm currently writing a book, tentatively entitled "The Use and Abuse of Fiscal Language," that discusses the often poor relationship between fiscal terminology (taxes, spending, deficits, etc.) and underlying substance, such as the allocative and distributional effects of policies however labeled. One of my interests in the book is the long-term fiscal problem we face - in part how to think about it and devise measures for various distinct considerations (such as effects on generational distribution as opposed to policy sustainability), but also just how bad the problem may get and why our political system is letting it potentially get so bad.Rightly or wrongly, I have discerned that a very important cause is the crazy, and in a historical sense un-American (just as Bin Ladenism and fascism are alien to our best traditions) ideology of the radical right that has taken over first the Republican Party and then, more tenuously, the country. Other instances of seeing these guys at work - lying and twisting language, insisting on total victory, turning on cue like a flock of birds, shredding any notion of cooperation with political rivals or of valuing legal and institutional norms, etc. - are therefore of professional interest, you see. There, I've explained it.If there's one thing I look forward to, by the way, it's the day (if it comes) when I get to return to being a plague-on-both-your-houses-style political observer, rather than being so appalled by one side that I am forced to sound like I am on the other team however out of place I would actually feel there.Anyway, after this lengthy windup, here's the pitch, a delightful excerpt from today's Senate floor debate, courtesy of the "Think Progress" website:SEN. SCHUMER: Isn’t it correct that on March 8, 2000, my colleague [Sen. Frist] voted to uphold the filibuster of Judge Richard Paez?SEN. FRIST: The president, the um, in response, uh, the Paez nomination - we’ll come back and discuss this further. … Actually I’d like to, and it really brings to what I believe - a point - and it really brings to, oddly, a point, what is the issue. The issue is we have leadership-led partisan filibusters that have, um, obstructed, not one nominee, but two, three, four, five, six, seven, eight, nine, ten, in a routine way.

Tomorrow (Thursday) I will be in Washington, giving a brief memorial talk concerning David Bradford at a National Tax Association tax reform panel. The next day, I will be in Princeton giving a brief talk concerning David at a memorial service on campus. Completely different talks, of course, because one is a more professional setting and the other more personal.I will post both talks here after giving them.

Tuesday, May 17, 2005

Norman Ornstein at AEI explains the utter lawlessness of the "nuclear option" with far more precise institutional knowledge than I could muster on this topic in my earlier post:The Senate is on the verge of meltdown over the nuclear option, an unprecedented step that would shatter 200 years of precedent over rules changes and open up a Pandora's box of problems in the years ahead. The shaky bipartisanship that holds the Senate together--in a way that is virtually absent in the House--could be erased. Major policy problems could be caught up in the conflict. The Senate itself would never be the same. Let us put aside for now the puerile arguments over whether judicial filibusters are unprecedented: They clearly, flatly, are not. Instead, let's look at the means used to achieve the goal of altering Senate procedures to block filibusters on judicial nominations. Without getting into the parliamentary minutiae--the options are dizzying, including whether points of order are "nested"--one reality is clear. To get to a point where the Senate decides by majority that judicial filibusters are dilatory and/or unconstitutional, the Senate will have to do something it has never done before. Richard Beth of the Congressional Research Service, in a detailed report on the options for changing Senate procedures, refers to it with typical understatement as "an extraordinary proceeding at variance with established procedure." To make this happen, the Senate will have to get around the clear rules and precedents, set and regularly reaffirmed over 200 years, that allow debate on questions of constitutional interpretation--debate which itself can be filibustered. It will have to do this in a peremptory fashion, ignoring or overruling the Parliamentarian. And it will establish, beyond question, a new precedent. Namely, that whatever the Senate rules say--regardless of the view held since the Senate's beginnings that it is a continuing body with continuing rules and precedents--they can be ignored or reversed at any given moment on the whim of the current majority. There have been times in the past when Senate leaders and presidents have been frustrated by inaction in the Senate and have contemplated action like this. Each time, the leaders and presidents drew back from the precipice. They knew that the short-term gain of breaking minority obstruction would come at the price of enormous long-term damage--turning a deliberative process into something akin to government by the Queen of Hearts in "Alice in Wonderland." Rule XXII is clear about extended debate and cloture requirements, both for changing Senate rules (two-thirds required) and any other action by the Senate, nominations or legislation (60 Senators required). Ignored in this argument has been Senate Rule XXXI, which makes clear that there is neither guarantee nor expectation that nominations made by the president get an up-or-down vote, or indeed any action at all. It reads: "Nominations neither confirmed nor rejected during the session at which they are made shall not be acted upon at any succeeding session without being again made to the Senate by the President; and if the Senate shall adjourn or take a recess for more than thirty days, all nominations pending and not finally acted upon at the time of taking such adjournment or recess shall be returned by the Secretary to the President, and shall not again be considered unless they shall again be made to the Senate by the President." By invoking their self-described nuclear option without changing the rules, a Senate majority will effectively erase them. A new precedent will be in order--one making it easy and tempting to erase future filibusters on executive nominations and bills. Make no mistake about that. The precedent set--a majority ignoring its own rules to override longstanding practice in one area--would almost inexorably make the Senate a mirror image of the House, moving the American system several steps closer to a plebiscitary model of government, and the Senate closer to the unfortunate House model of a cesspool of partisan rancor.

The New York Times reports that the Bush Administration, or more specifically the Treasury Department (although I suspect political input), is now yelling at China for keeping the dollar too strong against the Chinese yuan by buying hundreds of billions of dollars in Treasury securities. Indeed, we are apparently threatening unspecified retaliation.This is pretty hilarious on several levels. One is that the Chinese are subsidizing us by enabling us to buy their imports more cheaply. But the main one is that the Chinese are contributing enormously to funding our profligate budget policy by gobbling up all those Treasuries. Who knows when the "hard landing" would start if they weren't doing it? Moreover, I would say they are being very unwise from their own financial standpoint. Not only they are probably quite under-diversified, but they are making what strikes me as a very risky bet, given the long-term U.S. budget picture and evident lack of political will to start addressing it seriously.Imagine if the Chinese saw the error of their ways, or bowed to the threat, by changing their market stance on US Treasuries from buy to sell. The ramifications would be world-wide, but we would probably feel them the most.How are we planning to retaliate, anyway? Maybe by defaulting on the bonds or printing money to devalue them? That's probably the best threat we have in terms of effects on them, leaving aside the effects on us.In making these threats, the Bush Administration reminds me of the story about the scorpion that stung the frog that was carrying it across the stream. "Why did you do that?" the frog asked as it started to die and the scorpion started to drown. "It's just my nature," answered the scorpion.

Monday, May 16, 2005

Michael Graetz's tax reform idea, which Graetz pushes at every possible juncture like a little kid trying to let the teacher know that he really, really needs to go to the bathroom, has been getting some play lately, so I thought I would address it.On the plus side, I decided not to call it a "bad idea" in the heading of this entry, because that would be overstating things considerably. Bad compared to what? Surely better than present law. But bad, I would say, compared to some other prominently discussed tax reform ideas, such as the X-tax or the cash flow consumption tax.Graetz's big idea is to combine the income tax with the consumption tax, having a flat-rate version of the latter apply to everyone while the income tax applies only to people with taxable income above $X (say, $100,000). In his 1997 book, in order to make the rates sound good, he very sneakily quoted estimates concerning revenue-neutral tax rates that were unrealistic because they had what tax analysts call a "cliff" like you wouldn't believe. To illustrate, suppose that his income tax rate was 25%, and that his version would only apply to people who earned $100,00 or more. He pitched rates that were based on the idea that someone with income of $99,999.99 would pay no income tax, while someone at $100,000 would pay $25,000. He realized that no sensible system could actually be designed this way, but wanted his sales pitch to sound good and evidently did not much care if this reflected trickery.But on to the Graetz plan. Its main point is to eliminate, he says, 100,000,000 unneeded tax returns. After the gambit I described above, one is hardly inclined to trust him on this number. But yes, all else equal, it would be nice if fewer people, especially in the lower ranges, needed to worry about filing income tax returns.Keep in mind, however, that poorer people would still have to figure out income, earnings, or some such thing for various other purposes, such as the earned income tax credit (whatever form it would now take), along with welfare, Food Stamps, Medicaid, rent subsidies, etc. So he's really reducing compliance burdens for the middle class, not the poor. Also, what about home mortgage interest deductions, charitable contribution deductions, etc.? Not that we necessarily need these things, the former especially, but does it really seem politically plausible that we won't still have them? So we are now probably down way below 100,000,000 fewer returns.Thus, the benefit Graetz trumpets is being greatly oversold. How about what he doesn't do?The really big money, in terms of administrative waste from our current system, is in business taxation and the upper income echelons, not the folks at the bottom, who may find their tax returns annoying but only spend limited resources on planning and return preparation. Think of all the billions of dollars that businesses spend on tax planning, ranging from the totally permissible to outright sheltering. A company can't even raise funds without a lot of wasteful tax planning going on in order to determine what labels to put, for federal income tax purposes, on the instruments it issues (e.g. debt, equity, options, etc.). Rich people as well as businesses spend enormous resources on tax planning and compliance, constituting waste from a societal standpoint even if it is completely above-board. All this is due far less to deliberate income tax preferences than to structural problems with the existing income tax (the realization requirement, the debt versus equity distinction in corporate tax law, etc.).This enormous and costly mess would remain intact under Graetz's scheme, except perhaps for a minor benefit from income tax rate reduction, whereas the X-tax and the cash flow consumption tax would reduce the tax planning and compliance issues very substantially.So Graetz's plan, which is predicated on reducing administrative and compliance costs, almost completely misses the predominant source of such costs. Good job, Michael.Lately Graetz has been saying that the way to transition into his system politiclaly is by repealing the regular tax and letting the alternative minimum tax (AMT) take over. This suggesion is not entirely unmotivated, I would guess, by a tincture of vanity. Graetz proposed replacement of the regular tax with the AMT back in the 1980s, and thus he may think that he will look like a prophet if it actually happens now. By the way, he failed to foresee in the 1980s what a mess it would be when both systems were applying at the same time, as has been increasingly happening recently.What he conveniently overlooks today is the fact that the AMT these days is rather a mess, and not really the system one would choose as a tax reform template. For example, it does not allow personal exemptions for dependent children, whereas family size clearly should affect tax liability. (See my recent article, posted on SSRN, entitled "Households and the Fiscal System," available here) The AMT also unreasonably denies what the Code calls "miscellaneous itemized deductions" for certain costs of earning income. And the AMT doesn't allow state and local income tax deductions to individuals. Thanks a lot, say the blue states. In truth, there is something to be said for denying these deductions, but once again this is an issue that needs to be tackled directly. We are not going to back into it just by purporting to use the AMT, and once we are adjusting the base to include elements of the regular tax it is no longer quite true, in any meaningful way, that we are keeping one tax and dropping the other.Although I am expecting little from the Tax Reform Commission given the overall political context (otherwise I might hope for something, as there are some very good people there), I would certainly be disappointed if the Graetz plan was the best they could come up with. There are much better plans out there, and I hope they will have the good sense to say so.

One under-appreciated aspect of the ongoing "nuclear option" controversy in the U.S. Senate is what it tells us about the current health of the idea, predominant in U.S. political culture for the last couple of centuries, that laws and rules should be followed in an honest way. Apparently very few on the right believe in this idea any more (despite all the blather about "strict constructionist" judges), and without it democracy and the rule of law are in great danger.Whatever the merits of filibusters - and certainly both sides are wildly opportunistic on this question - it is unambiguously the case that the "nuclear option" gambit is unlawful, albeit that there is no enforcement mechanism to stop it if it gets the 50 votes needed to let Cheney settle it.The basic underlying point here is that the Senate governs itself by rules that cannot be changed without 60 or 67 votes. But interpretation of the existing rules requires only a majority vote. This is a sensible and workable way to run things. Both sides may want some measure of minority protection since they know they will occasionally be in the minority. (Call it risk aversion.) If everything required 60+ votes, then only a super-majority could ever do anything. But if everything required only 51 votes, there would be no minority protection.So the existing distinction is a reasonable and sensible way to carve things up. But it requires some modicum of good faith behavior in interpreting what the current rules say. Inevitably there are ambiguities about whether a given motion is plausible rule interpretation or rule change, but there are also very clear cases on one side of the line or the other.Ruling filibusters of judicial nominations improper under the current rules is unambiguously a rule change, not rule interpretation. And the argument that the existing rule is unconstitutional, because the Senate is supposed to advise & consent on nominations is so ludicrous, given the Senate's leeway to decide its internal rules that determine how it decides whether to consent, that even the National Review and Wall Street Journal (I think both, though I'm not 100% sure) have admitted as much.Acting unlawfully, and in bad faith given the rules, used to be frowned at, but no more. Not just sleazoid politicians but conservative megaphones such as the NR & WSJ take the view that this just doesn't matter. All that matters is getting the results they want, winning the showdown, etc.This is how Saddam Hussein used to think about law, and no doubt still does.And of course it is no isolated instance. Think of my colleague in law teaching, John Yoo at Berkeley, treating the international anti-torture rules as merely so many loopholes to be skated through, and then proclaiming that the 2004 election had completely settled the issue. Or think more generally about the Bush Administration/neocon view that in the international realm laws and rules merely constrain the US, which can do whatever it likes since it supposedly has enough power. It never occurs to them that laws and rules can constrain others, too. But the domestic manifestations of this attitude are more troubling if you are an American and thus subject to what they do domestically.These are not your grandfather's conservatives. Edmund Burke would be physically ill if he saw these people in action. And the question of where it stops is pretty clear - it doesn't, other than among the libertarian conservative wing that understandably (and thank goodness) is out of sympathy with a lot of what this Administration does.Suppose a right-wing President used a Reichstag fire-type pretext to declare martial law and suspend elections, constitutional rights, etc. What portion of the conservative commentariat, or of the Republican membership in Congress (leaving aside about 5 or 6 Senators, and about 2 members of the House) would object? Is there any possible ground on which they would even consider objecting?

Friday, May 13, 2005

For those who want a broader and more thoughtful take on Social Security reform than either side has been providing these days, I recommend this piece by Eugene Steuerle. Even if you don't agree with it all (and I agree with most of it), it goes way beyond shrieking like a parrot either "Private accounts - private accounts" or "No change needed yet - no change needed yet."Even so thoughtful a proposal as the Diamond-Orszag plan, described in detail here under the April 7 date, is constrained by the terms of the exercise, which, rather than attempting full optimization, largely consisted of showing how one could restore Social Security's solvency without greatly changing its policy content.

Friday, May 06, 2005

I am shocked, shocked by this latest revelation that President Bush willfully pushed for false intelligence if necessary (and it was) to support the decision he had made by summer 2002 (long before he piously declared that it was a last resort) to invade Iraq.

Wednesday, May 04, 2005

If the Yankees' collapse is for real, and I am increasingly thinking that perhaps it is, I must confess that I will enjoy every second of it, at least for a long while. I have begun watching their games, which I can't remember ever doing before. I am not vengeful, however. After ten or so lean years to make up for everything up to now, I will have no objection to their winning the AL pennant once every 14 years and the World Series once every 30 years (i.e., right at the major league average).

Monday, May 02, 2005

Bush's plan, everyone now understands, is to turn Social Security into a program just for the poor.The standard liberal/left/Democratic response is offered, naturally enough, by Paul Krugman, who says:"It's an adage that programs for the poor always turn into poor programs. That is, once a program is defined as welfare, it becomes a target for budget cuts.You can see this happening right now to Medicaid ..."My take on this is quite a bit different than Krugman's, although the quoted statement has some truth. (But then again, over the years Medicaid has grown quite rapidly. The latest proposed cuts do not at this point establish much of a trend. They are fairly small and contested even among Republicans. Plus Bush wants to cut Social Security for the middle class as well as Medicaid for the poor.)Anyway, let's grant Krugman's point for the sake of argument. The problem with it, as an argument for keeping Social Security a middle class program so that it will remain progressive, is that, when we camouflage things, they sometimes become the thing we are pretending they are, rather than what we really want them to be. In other words, you universalize Social Security and Medicare, and while you're at it muddy their transfers so they are hard to see, and what you end up with is a huge program that crowds out other budget items and is not itself enormously progressive on a lifetime basis. Thus, giving the middle class a stake so the programs will endure is a bit like giving Scrooge (pre-transformation) a huge cake so that Tiny Tim will get a couple of crumbs.There is a better rationale for keeping Social Security a universal program rather than just poor relief. The argument, a dirty word in many circles but nonetheless apt and justified here, is paternalism. People are prone to save too little of their lifetime incomes for retirement. By taxing people when they are young and giving them benefits when they are old, Social Security and Medicare in effect force them to save. They can respond by saving less on the outside, but not by zeroing out their future benefits by borrowing against them in advance. The paternalistic limit only hits people who would otherwise save too little. If you are saving enough anyway and adjust for this forced saving component, you aren't hurt at all (leaving aside the analytically distinct question of the program's transfer content).This type of program makes a great deal of sense. And it is not only paternalism. Also moral hazard, since we would presumably rescue people who entered retirement with nothing saved, so we might as well make them save it for themselves.Anyway, this is a rationale for a universal program, although in the upper tiers it is unlikely to make much difference.One could say that Bush recognizes this via the private accounts element of his plan. But the problem there is that people's bedrock tier of saving oughtn't to be invested riskily. From a rational planning standpoint, you start with a fixed real life annuity, and build the 401(k)'s et al on top of that. And if the forced saving is all you have, then it should be invested safely rather than riskily.This point is pretty familiar already to people who have been following the debate - Peter Orsag, for example, made it eloquently in his testimony before the Ways and Means Committee, which I mentioned in an earlier post. So I will close here.

About Me

I am the Wayne Perry Professor of Taxation at New York University Law School. My research mainly emphasizes tax policy, government transfers, budgetary measures, social insurance, and entitlements reform. My most recent books are (1) Decoding the U.S. Corporate Tax (2009) and (2) Taxes, Spending, and the U.S. Government's March Toward Bankruptcy (2006). My other books include Do Deficits Matter? (1997), When Rules Change: An Economic and Political Analysis of Transition Relief and Retroactivity (2000), Making Sense of Social Security Reform (2000), Who Should Pay for Medicare? (2004), Taxes, Spending, and the U.S. Government's March Towards Bankruptcy (2006), Decoding the U.S. Corporate Tax (2009), and Fixing the U.S. International Tax Rules (forthcoming). I am also the author of a novel, Getting It. I am married with two children (boys aged 16 and 19) as well as four (!) cats. For my wife Pat's quilting blog, see Patwig’s Blog.